How To Pay Off Debt (Debt Snowball vs Debt Avalanche)
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- เผยแพร่เมื่อ 19 พ.ค. 2019
- In this video I show you how to pay off debt using the Debt Snowball or the Debt Avalanche method.
There are two fundamental differences between the Debt Snowball and the Debt Avalanche methods, which we go over in this video.
Essentially, the Debt Snowball method has you paying off your debt in order of smallest amount owed to the largest amount owed regardless of interest rate.
The debt Avalanche, however, has you paying off your debt from highest interest rate to lowest interest rate, regardless of amount owed.
There are pros and cons to both, and I will show you in a real Excel spreadsheet how the debt snowball and the debt Avalanche will help you pay off debt!
Make sure you watch until the end of this video to fully understand how to pay off debt using the Debt Snowball and Debt Avalanche strategies!
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*Which method do you think is better?*
Avalanche is the better of the 2 IMO. Great video and useful insight I will definitely apply to my lifestyle. Can you please send me the link to the spreadsheet.
Thank you
Strongly depends on the amounts and the interest rates. If your biggest debt has a high rate and you focus on this, it might be best for the avalanche and interest payments, but the psychological effect of killing sequences of debts is reduced. It really depends on the situation of course. Ramsey's argument is that the success of paying off debts counts higher than the interest payment, as most of his cases didn't start out sensibly anyway. If you have $20K or $30K credit card debt against 15% to 25%, you're already not the sharpest knife in the block, so getting to success seems more important than saving a buck on interest that doesn't need to be paid.
As others have said, from a mathematical point of view, the avalanche makes sense. But there's a reason that people end up in these situations and that usually is nothing about making sense and all about making bad decisions and sticking your head in the sand. I think the Ramsey approach (small successes first to build towards bigger ones) is helpful for these situations.
It's in the description
Well said
It really depends on the person. Generally speaking the average person can benefit from the snowball method better imo
Many years ago, I paid off a car loan. I was so happy to have that money available. Then, it hit me. I was used to paying for the car loan. So, I started paying myself, instead. I put that payment in my savings account every month. In less than two years, I had the money to buy a new car, but I didn't. I didn't need a car, and my savings kept rising.
Every time I would get a raise, I would add that additional amount to the mortgage on my house. I paid the mortgage off several years early.
help me lol. im making more money than i ever have been and its getting to my head, im 13K to being debt free but i keep looking at the next most expensive thing
Big ups to everyone working effortlessly trying to earn a living while building wealth. I am 50 and my wife 44 we are both retired with the net worth of over $3million with no depts. Currently living smart and frugal with our money. Saving and investing lifestyle in the financial market made it possible for us this early even till now earn monthly through passive income.
What kind of investment do you make? I totally agree with you. I have a lump sum that does almost nothing in a savings account. But it is difficult for me to participate in certain types of investments at the moment due to the full-time nature of my job. It will be way too stressful to combine so I don't even think about.facing it.
@@alyciagordon3447 Generally, investing requires higher knowledge. For this reason, It's important to have a solid support structure (financial consultant) to guide you through especially in asset picking. I operate with (Alexandra Diana Jose) a consultant who partners with a licensed wealth management firm. For the record, the experience has been the best for my finance. She made me financially stable investing through her help, now I earn on a monthly basis through her passive income strategy... So I'd advise you do get a good investment advisor for yourself.
@@davidreus9321 please how do i get in touch with her.
Impressive. Would you mind sharing some more details. I’d like to have a talk with her.
@@alyciagordon3447 She is easy to find , make a quick research of her on the internet with her name Alexandra Diana Jose . She works with anyone independent of their location.
Tnx for this info, I just looked up your investment professional and found her page. Her experience is pretty impressive. I wrote her and I'm waiting on her reply.
Informative! I used the debt snowball to pay off $25k with a $35k income in 1.5 yrs. no matter how u do it, it’s worth being financially free!
That's Awesome!! Great job
Wow nice job!
That’s inspiring bro
You had help. Math says that impossible. I am ASSUMING you live rent free and someone drive you to work. Correct me if I am wrong... If you not paying rent it's equal to making 50k plus
Sick of being stuck in debt constantly paying for stupid decisions I’ve made in the past day 1 man coming back here to update thanks for the lesson bro
I appreciate how you cut out all the nonsense and get right to the meat of the lesson/issue in easy to understand language and concepts. Thanks for all your effort.
My pleasure I appreciate the kind words
Thank you for providing the calculator to determine the difference, snowball vs avalanche. I'm seeing so much advice about why snowball is recommended, but seeing the raw savings using avalanche I find it even more motivating so I'm choosing that method.
As dave says though... If you think its a math problem then you wouldn't be in debt to begin with... It's a behavior problem that you think its okay to get into debt
Agreed. Personal finance is 90% behavioral, 10% math.
this is my first time watching you but am reaslly impressed with your videos
The white shirt with white background is a good look lmao. keep up the vids crazy how fast much this channel has grown
haha I feel like a floating head. Gotta start wearing darker colors! Thanks for the kinds words
When you are debt free, you are rich
Right! You don't have to be "wealthy" to be rich!!
Not at all
Not if you have kids and pay child support....oooooffffff!
Not really
Agree
The snowball worked for me! Debt free as of January 15th 👌
Congrats!
Congratz! I'm just starting this journey so I'm looking forward to being in your position!
@@ComicCulture good luck!!
Boom
Congratulations!
For people who struggle to save, I'd try the snowball. For people who can control themselves financially, the avalanche works better imo
well said
That’s a very good distinction. Yet if one is good with their finances they shouldn’t have much consumer debt to begin with 😝
If you are financially in control then you wouldn't have to pay off debt in the first place.
I like how you clarified that. Thank you. Debt snowball for me, then.
It's not a matter of opinion. It's a fact that the avalanche works faster and costs you less in the long run.
Great Video Bro!!!! E55 AMG car loan is always the best kind of debt! Lets go baby!
Lololol
You know I have to give you props... Not only do you have a very personable presentation style, but you speak plainly/clearly without over complicating anything, so you are always easy to follow.
I'm in my 50s, and am well into being 'set' thankfully, BUT, I still really enjoy your videos as you just seem to legitimately care about what you are doing and it come across as authentic. Given ALL the YT content that is garbage, it is so refreshing to see somebody doing something that seems to be a labour of love, but also helping complete strangers as well.
Big props to you Marko, I really like your stuff and have subscribed. I really think you have a great way of presenting data clearly that speaks to (what I perceive at least as) 'average joes' without talking down to those you are helping. Keep it up.
Thank you Brian!
Thanks for the info as an Entrepreneur I do want to learn on financing , time management & smart goals
More like, CC 12k, Auto 40k, Student 135k. While making 34k..... That's a more realistic view on the average person sadly.
Agreed
@Tahkeem Hilton2.0 I was just giving a realistic example. I hear people doing stupid things with money when they call into Dave's show. I use to also see a tax return as a bonus but it is the complete opposite. That is money you could have used to pay off debt to minimize your debt growing with interest. That debt free money that could have been invested and grown to a larger sum. The system is so messed up that even if you fill out your W-2 per the instructions it will still be wrong. Dave has told people in some circumstances to put down dependents even if you have none just to adjust it correctly. The idea is to get or owe $200 or less when tax time rolls around.
What kind of a major costs 135k student loan and makes only 34k a year? They should have think better before they get whatever major it is.
34K, with 3 growing children...
@Alimah B No it's not. Listen to Dave Ramsey's show. You will be shocked at how much debt people have and how small their shovel is (Amount they make per year).
Thanks,..... youtube's Tim Tebow!
lmao!
Exactly 👍
was thinking the same
I'd definitely use the one that saves me more money. Thank you!
TY for this
Thanks! I will be using these spreadsheets
Enjoy!
So valuable, thanks
I guess if you got the idea from Ramsey, you have to mention him, but his sanctimony really turns me off. I prefer your delivery. Thank you (my comment, my opinion 😉).
I appreciate that
Great video
I love your channel! I literally see the topic of your videos and my eyes light up! Your putting out some real informative shit!
The other advantage to debt snowball is it frees up minimum payments quicker and so it reduces your risk if something were to happen like you have an unexpected expense or lose your job.
Awesome video, u got a sub
Thanks!
⛩️This matches perfectly with the Kaizen approach to goal setting‼️
Thank you!
My pleasure
Great content.
Omg, I think its gonna be my first comment, really like your videos, keep up the good work thanks for the tools and info
My pleasure Rafael!
I had heard of this method before and I can attest this method truly works. The emotional boost you get when you pay something off is also a good feeling. Pay off debt, minimize new debt, save as much you can..enjoy your life. Cheers
Thanks 👍
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how about an update video on how to choose a creditcard?
Will do
Hey Marko....thanks for the videos! I am new to your channel and I have a question about the snowball method. So my credit cards are the least amount of debt for me and then it's my car and then my student loans. I wanted to know: once the card balances are gone (I have 3 cc btw), do I close all of the accounts or do I keep them open? I was once told that closing the accounts can have a negative effect on your credit score. Please let me know. Thank you so much!
I want to know that too!
I've checked around and for me I need a much better credit score so I'm paying my credit cards up to zero and I am keeping them open because I need to refinance my car before I pay it off. Paying my credit cards to zero will give me a zero utilization percentage which will raise my credit score so it will be easier for me to get a low percentage when I refinance my car than I'll pay off my car.
In the end I will close Three credit cards and keep 3 open.
It's almost impossible to get any kind of loan with bad credit or no credit so I myself need some cc even if I don't use them.
It was really hard for me to get cc to begin with, so I'm keeping 3 open with zero balance.
Ooohhhhhhhh.....I completely get it now. I've been trying to pay off highest amount first. That's getting me no more. I'm switching methods to snowball. Thanks
Highest interest rate first is mathematically correct
Marko - WhiteBoard Finance I'm starting my journey to financial freedom this week. Your videos are very helpful. I thank you for imparting your knowledge. Would you ever recommend filing bankruptcy?
I think it really depends on who you are as a person. Being in debt doesn't automatically mean you're not fiscally responsible or intelligent.
People with discipline and financial intelligence are definitely better for avalanche. But people who struggle with money and understanding it its probably better to do the snowball
The wood ceiling in your house is sick. Thanks for the info
martinez is legit and reliable.
Have worked with him some months back and believe me he’s one of the legit hackers he’s the best if you need help with credit score fix he helped with my credit repair...
can you do a vid on how to calculate vid Sponsered on youtube, how much should they pay you?
thanks
Yeah MARCO ! The Dinero master !
Avalanche makes the most sense if you have both high interest cards and a strong discipline to pay them off first. That's what I'm going to try on $50K of debt. Especially when I'm getting charged $400 per month in finance fees on a 16% cash rewards card.
thanks for great content, can you pleases make a video how to invest small saving for working individuals.
I love you outfit stay safe brother
I use both! In the past, if I have numerous accounts with balances, then I start with snowball. Once I have knock some out, then I switch to avalanche approach.
Nice!
That’s actually a very smart idea
Yup!! I have used both also!
I’ve been working doing that same exact thing. Only because I have 3 CC’s with low limits that have “high balances” but the high balances are actually not much at all but it really impacted my credit utilization. So I’ve been knocking those out quickly while my Credit score is going up significantly and then my 2 high balance accounts will be my only debt and I’ll get those paid off within a year
I need to get myself out of debt 8k in debt I made choices in my early 20s now as I am older trying to paying those off, and I was living in a high rent environment. Now, I moved have a good job that pays me well, now slowly paying off those debt
I would definitely take care of that 18 thousand percent apr CC first... :)
thank you. i appreciate your work. it is super helful
My pleasure brother
I am a big fan of Dave ramsey. I understand that what he teaches is for your everyday person to succeed....but if your a disciplined person this method works too.😎
God bless you! Thank you so much for taking efforts into making this one.... I'll try clearing my debts this way and definitely get back with a review! Keep shining! Peace, love, light, happiness ❤️❤️
Debt Avalanche For Sure, I would go with high Interest first, vs smaller portion payoffs. I have 0 Debt outside of Mortgages & 1 Car and have never carried anything outside of that, CC is paid off money, and no Student Loans. Good Video Marko - Channel is really blowing up :-)
Awesome! Thanks I appreciate that 👍
"1 car" could mean 1k or 75k
Matthew true true, it’s a 6k Loan :-)
This amazing. Subscribed! Where do I find this calculator?
Thanks
Keep it up marko!! Thanks man
Thanks!
Waooohh I was so lust in management of finances but now I will go in for the snow ball method. Thank you
Avalanche > Snowball ; logically speaking.
Zachary Laid Finding Freedom but getting into debt is not logical in the first place.
@@justshady depends why you got into it.
Mathematically yes you are correct
This is why I like Marko. He gives you two alternatives, and then tells you which he prefers. Rather than Dave Ramsey who thinks you're stupid unless you do what he tells you in the exact manner he tells you to do it.
Lol thanks
Thank you for the detailed explanation. 👍
Thank goodness I saw this video, I'm going to use these methods to pay off my debt!
great video! i've been using a similar method to the snowball method, but it so happens that the interest rates fall in order from low to high also. thanks for confirming my method is correct. now its just a matter of time and patience.
Thanks Ryan
I don't see the link? Thank you for easy to understand vid.
martinez is legit and reliable.
Have worked with him some months back and believe me he’s one of the legit hackers he’s the best if you need help with credit score fix he helped with my credit repair...
Awesome. Thank you!!
what if your debt is in collections. The majority of mine are in collections. Do we still follow this method?
The debt snowball method is effective, yet investing in assets such as rental properties or syndications might be a more strategic use of available funds than debt repayment. Targus primarily targets individuals with lower net worth who are burdened by debt. However, for those with a net worth exceeding $1 million, it's often more advantageous to focus on wealth accumulation rather than debt elimination. Repaying debt is not necessarily synonymous with achieving financial freedom.
This was great, thank you!
Marko again thank you, you have helped growth financially. I have seen friends getting screwed because of small debts that they didnt know how to manage. I was told by my older brother a few years ago :" you will need to know how to use excel you like it or not." Hw was right lol
Again thank you
Lol your older brother is smart
Great debt payment method
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This helped so much!!! Thanks
My CC and auto are in the same configuration for both strategies.
Im playing chess while yall are playing checkers.
such a great video. thank you
thanks for watching please share :)
Thanks bro; question for ya. With all my credit cards and bank statements, now being online and almost instantaneous and showing registers and all that stuff what is the point of Quicken? I thought about investing in that software but frankly, I cannot see the point of it.
Tim Tebow really starting to show off now😂
do both and get rid of that interest and lets kill it out there 🤘
Agreed! Thanks for watching
Man your subs are really taking off. Hope it keeps going! I subbed not too long ago at 32K. Great video too btw.
Thank you! It was a lot of hard work that is paying off
This is one of the most useful videos on the net. I have a friend with a mortgage that it will be paid off in 25 years and a car loan for 60 months (yeah, not the 20/4/10 rule ik), so I shall share this video with him. Thank you, Marko!
Marko great video....New to you tube and unable to find your link to Debt reduction calculator.
Great work Marko. Thanks.
My pleasure thanks for watching
Thanks for the info. Subscribed and shared!
thanks a lot bro 😘😘
Great video, snowball method I think it's better
I like your username
@@WhiteBoardFinance thanks, I love my bike
I had a DR650 my dad had a GS
to summarize it, you pay off the debt with higher interest first?
Yes
SO HELPFULL BRO!! Appreciate it!
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Sweet where did you get that cool shirt?
My wife buys all my clothes. Most likely TJ MAXX lol
@@WhiteBoardFinance that's unhelpful but thanks for the reply and great video!
Marko - WhiteBoard Finance tjmaxx is who got me into debt, my wife wouldn’t stop buying stuff from there🤯😂
Just new to this channel, have subscribed, cannot stop watching all videos, have completed my snowball spread sheet. Thank you so much
Debt Avalanche. Great info!
Thanks!
Great video, thanks so much!! I’m going with avalanche method.........also helps it’s one of my smallest balances too so win win
I'm utilizing the debt snowball on my Ford Escape payments. We moved all our van payments (paid off in the fall 2018) onto the car payments. It's working great! Instead of $244/mo, paying about $400. And that payoff quote is getting smaller quickly!
That's what we did for my wife's ford escape payment lol nice good job
Good Stuff Bro! 👏🏾👏🏾👏🏾
Thank you so much for this new tool!
Thank you for the video and link to the spreadsheet! So great to be able to watch the lesson then apply it to my own finances. Keep up the great work, all your videos are awesome.
Thanks Joe I appreciate the kind words
Marko, glad i found your channel my personal debt $70000.00 my house equity $350000.00, im not sure what to do, any advise?
Use the methods in this video. I'll be making a video on the baby steps later this week
@@WhiteBoardFinance thank you man, you are the best..
I am a Dave Ramsey fan, and I'm a huge fan of yours! I am not in debt. But I owe myself several millions of dollars 😀
Best regards, my bro
*Walsh Financial*
Thank you!
@@WhiteBoardFinance I created a youtube channel 'Walsh Financial' and I will be posting content soon, and giving you huge shout outs. I'm extremely budget minded. I even told several coworkers about your channel. I have wanted to do whiteboard-structured videos ever since I started watching yours. I'll try to at least keep the substance original, and to promote you.
wow that means a lot. best of luck to you and your channel :)
@@WhiteBoardFinance Thank you!!!! It's so nice to actually talk to you. I'm sooo excited to express my creativity and to "meet" other youtubers (online) and to help people with personal finance. I have about 300 subs on this channel for previous vlog videos, I have taken about 2 years off and set my videos to private. I needed to regroup and increase my personal security and limit private, personal details. Peace ✌
Why would someone pick "snowball" if it pays more over time in interests? i think avalanche seems like a better strategy - money logic. But there's a reason snowball exists. why is that?
The best personal finance channel ,Thanks a lot bro
My pleasure Mario thanks for watching!
helpful. Thank you!
Thanks for watching
Thanks a lot for the Info.
My pleasure thanks for watching Tony
This video is very important for everyone person who has Debt 👍
I only owe $2,000 in student loans
knock it out
Dude 2k is nothing. Knock it out with a smile on your face👍🏾
Thank you so much. I learned to manage my finances.....
I started with the largest and highest interest first...I freed up a lot more cash, now my other debt seem like a piece of cake to pay off. You just need to commit yourself to allocating the money from your paycheck to debt...and learn to avoid impulse buy temptations!
Excellent video!! Thanks for putting in the work to do this lesson 🙏🏾 I’ve shared it across my platforms. The Debt Avalanche is a fantastic advance from the debt snowball, especially for business owners that will themselves to get higher business credit scores for paying off debt faster